2023 (3) TMI 1343 - AT - Income Tax

Allowability of expenditure related to the project or running of the company - business of the assessee was not set up, therefore, the expenses debited in P L account were not eligible for allowing as revenue expenditure u/s. 37(1) - whether the business of the assessee of Developing Real Estate Park was set up in the year under consideration/in prior year or not? - HELD THAT - As the issue in dispute of set up of the business is emanating from the earlier assessment years 2012-13 and 2013- 14 which has already been allowed in favour of the assessee by the Tribunal 2018 (12) TMI 1566 - ITAT DELHI therefore, respectfully following the findings of the Tribunal the finding of the Learned CIT(A) of the issue in dispute is upheld. The grounds raised by the revenue are accordingly dismissed.

Summary

Issues involved:
The judgment involves the following Issues:
1. Whether the business or renting of project has been set up before completion of the building.
2. Consideration of legal precedents in determining the setting up of business.
3. Assessment of the stage of business setup and commencement in relation to allowable expenses.
4. Appeal for adding, altering, or amending any ground of appeal.

Issue 1: Business Setup Before Building Completion
The appeal raised the question of whether the business of renting could be considered set up before the building was complete. The Assessing Officer contended that the business was not set up, leading to a dispute over the eligibility of expenses under section 37(1) of the Income-tax Act.

Issue 2: Legal Precedents and Business Setup
The appeal also involved a discussion on legal precedents, including the decision of the Hon'ble Bombay High Court in Piem Hotel Pvt. Ltd. case. The CIT(A) considered previous findings and legal interpretations to determine the setting up of the business, emphasizing the relevance of setting up the business for expense allowance.

Issue 3: Assessment of Business Setup Stage
The judgment assessed the stage of business setup for the assessee, a subsidiary engaged in real estate projects. The CIT(A) allowed the claim of the assessee based on the findings from earlier assessment years, highlighting the importance of determining whether the business was set up during the relevant period.

Conclusion:
The judgment upheld the findings of the CIT(A) regarding the setting up of the business, drawing on legal principles and precedents to determine the eligibility of expenses. The decision emphasized the distinction between setting up and commencement of business, affirming that once the business is set up, expenses are allowable as business deductions. The Tribunal's decision in previous assessment years supported the allowance of expenses related to the business setup, leading to the dismissal of the revenue's appeal.